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Revolution Devolution

In-Depth

Revolution Devolution

Lebanon is now in the throes of a deep political and economic crisis that had been brewing for years, and the communication industry is hit hard. Naji Boulos, founder of Jicebe Creative Consultancy, former Managing Director of Memac Ogilvy Lebanon, and past president of the IAA-Lebanon chapter gives a harsh but realistic assessment.

What is the impact of the current political/social crisis on the advertising and media industries?   

Following years of economic mismanagement, Lebanon is facing dark days and the impact on all businesses is catastrophic. For the advertising industry, it’s a disaster – something that we have never seen before. 2020 will be the worst year since the end of the [civil] war [in 1990].

In the past, the industry always recovered quickly from market turmoil, because there was hope and the Lebanese were confident in their future. But today’s deteriorating economic conditions and the deep financial crisis are strong signals that the economy will take time to recover. This crisis is enormously damaging consumer confidence, the workforce, and companies’ cash flow and bottom lines. It will need months to get back to normal.

What’s the estimated drop in ad spend?

For the first time in more than 22 years, in 2019, Lebanon’s estimated advertising spend in media went below $100 million, a drop of 40% from $150/160 million; and since the beginning of the crisis [in October], we are witnessing a [additional] 90% drop. The [next] government will have an enormous challenge to regain market confidence and boost the economy.

What are the economic mechanisms behind the crisis?

To understand the situation, we need to draw a parallel between 1987 and 2019, both years that saw the Lebanese pound (LBP) crash.

Tracing back the events between 1975 and 1987, it is evident that, despite the ongoing conflict, the Lebanese economy was stable and people’s spending power remained relatively constant. In 1987, however, things took a turn for the worse all of a sudden. The dramatic devaluation of the Lebanese pound, coupled with a high inflation rate, presented a serious danger to the wealth of individuals and companies, who then sought refuge in the US dollar, using it as a replacement for the LBP as a means of exchange and even as a unit of account. Advertising became one of the first services to be ‘dollarized’ in late 1987, which proved to be a successful bid to create stability in the midst of a 730% hyperinflation of the LBP. Against all odds, by 1988, the market had improved.

(Image Credits – Rami Kanso )

Today, the situation is completely different. Due to a shortage of dollars in the market, banks are maintaining a certain level of dollars liquidity to buy imports. People are going back to using the LBP. If the pegged exchange rate, in place since 1997, is still LBP1,507 to $1, the real price of the dollar climbed to LBP2,500 to 1$, creating a 50% inflation in some categories – mainly food.

(Image Credits – Rami Kanso )

Under these circumstances, advertisers have other priorities than spending their money on advertising – like securing merchandise, paying salaries and other expenses.

How are different players affected? For example, are independent agencies more exposed than international networks?

The crisis started well before October 17th; most of the agencies had already taken some strict measures to downsize their operations. The revolution accelerated the process even further.

Multinationals can manage to survive by outsourcing their services to their network or by servicing clients outside Lebanon. This is probably the only way to sustain their operations. What worries me is that the majority of historical regional agencies are not owned by Lebanese admen anymore, so the emotional link with Lebanon doesn’t exist anymore. Today, holdings are under tremendous financial pressure and Lebanon is not a priority market anymore.

Independent agencies will have more difficulties in the short term due to the volatility of their revenue scheme. Some have already downsized their operation or cut salaries by half. There is no other way.

What strategies can industry players put in place to survive this crisis?

Creative agencies have to find ways to export their services, which is doable as they have a double competitive edge: talent and prices.

Media is in a more difficult situation because they cannot rely on foreign revenue unless they change their business model. The list of [media] closures in 2019 (even before the revolution) is dramatic: Future TV, LDC TV, Al Moustakbal newspaper, Femme, Noun, Elle Oriental, L’Officiel, Snob Hasna’ magazines, Al Jaras radio, to name a few. The few print media that are still available should fight for their survival by asking shareholders to provide financial support until business gets better. However, since print advertising is in decline worldwide, print media should push their digital versions further.

The situation in audiovisual media is odd. Viewership increased by 107% during the first weeks of the revolution, but this didn’t materialize into more revenue for the obvious reasons listed above. The threat is that TV stations will rely more and more on political financing and funding.

Radios are in a slightly better position and might survive because of their low operational costs and by cutting their expenses (canceling most of the programs).

Outdoor companies should drastically reduce the number of billboards in the streets – Lebanon is one of the most cluttered outdoor scenes in the world, with thousands of panels – with the double objective of decreasing their expenses (rent and municipality license fees) and lowering the supply to increase market prices.

What would be the upside, if any, to this crisis?

I am optimistic and positive by nature but in this situation, I don’t see any upside except maybe one: the revolution has revealed so many talents! It has proved that we’ve moved from an era of communication dictatorship to an era of participative communication democracy, where each citizen becomes a transmitter, constantly exchanging with thousands of other compatriots on social media.

Each citizen has turned into a copywriter, graphic designer, tagger, musician, singer photographer, filmmaker, writer, blogger… thus becoming a creator of images and messages.

Creativity has become everyone’s business; the situation on the ground has become a source of inspiration and an inexhaustible reservoir of ideas. The amount of content created, ranging from amateur to professional work, is massive. Anonymous people seeking neither recognition nor glory wanted to express, in their own way, their state of mind at the moment.

What outcome do you foresee, if possible, for the industry?

Every crisis has an end. Look at what’s happening in Greece or Cyprus. Lebanon will prevail, as usual; it might take some time for the country to bounce back but there’s always hope. Lebanon is known to be a resilient country and the Lebanese to be creative and able to adapt to any situation. This is one of the most difficult periods the country has ever gone through. Things will never be the same, especially for the media industry that lost many players. More than ever, industry players should unite to position Lebanon as the creative, digital and tech cluster of the region, because Beirut is home to the talent that can best adapt to different cultural backgrounds. This will not only boost employment and foreign investments but will have a major impact on Lebanon’s economic recovery.

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